The Fed, Japan & Gold: Intervention Changes Everything

0:04Trevor Hall: Happy Friday. Welcome back to Mining Stock Daily in this week's long form episode. Trevor Hall here, your host once again, with a two segment episode. First, we tackle that yen intervention with the Federal Reserve and the Treasury going in and backing the yen with Japan late last week in a meaningful way. It's unprecedented. We talk about that with our friend Peter Bookvar in the first segment of this episode. And then in the second segment, we welcome back Frank Capillary from Cap Thesis going over a number of charts, including the huge run, not only in equities, but also precious metals we saw this week.

0:46Trevor Hall: So a lot of great charts Frank walks us through. If you are listening to this on the audio podcast version of MSD, be sure to go also watch it on our YouTube channel. And if you have not already, hit that subscribe button at the Clear Commodity Network YouTube page where you'll find this episode and all of those charts from Frank. So good, thorough, long conversation here with both Frank and with Peter. A special thank you to Equinox Gold, Visa Silver, Revival Gold, and Integra Resources for their continued support of Mining Stock Daily. Let's jump into an important conversation on all things that happened with the mechanics of that Ian intervention late last week, starting off with Peter Buchvar.

1:32Trevor Hall: All right, we are kicking things off here with our weekly long-form episode here with a big picture macro view, but we're going to dive into a couple of very interesting stories. Coming out the last week here with Peter Bookvar. He is the chief investment officer over at One Point BFG. He's also the author of the book Report. Cannot recommend that daily enough. Peter, we are recording this and connecting Wednesday afternoon market close. We had a screamer of a day in the gold market. A lot of other things were up today, but three and a half percent on a day in gold, really kind of a breakout moment.

2:11Trevor Hall: I'm trying to figure and digest any information that really would justify such a big move in gold. How are you kind of interpreting the last 24 hours in the precious metals market? So obviously great to see for those of us that are long. Really had nothing to do with any real notable move in the U.S. Treasury market is yields were kind of flattish today, U.S. dollar kind of flattish. But I'm beginning to think that this could be a reaction to what Scott Besson and the U.S. Treasury is doing with the Japanese. And that here you have Treasury Secretary that says, we want a stronger yen and a weaker dollar on that cross rate.

3:00At the same time, just to paint this picture in multiple ways, you have the Bank of Japan, which over the last 30 years has been the modern-day architect of interest rate repression. With zero interest rates, they, of course, went negative. and QE, and to the point where the BOJ owns about half of the JGB market. So when the Bank of Japan in 2023 decided no more yield curve control, to me, that was sort of a seminal event. And while global interest rates were rising prior to that, I think that stepped up the pace. And now you have Japanese yields that are much higher further out on the curve and all of a sudden creating some competition to U.S.

4:01treasuries among other foreign developed bond markets. That said, that hasn't been enough to stem this persistent yen weakness because the BOJ continues to drag their feet on the short end. So now we've reached a point where the yen continues to weaken because the BOJ had every opportunity to hike rates last week, even though it wasn't priced in, but they should have hiked anyway. And this yen weakness is causing big problems for them because they import a bunch of their energy needs. You have the approval ratings of the prime minister that were 70 % in early June, now down below 60 % because people are pissed off about the ever-rising cost of inflation.

4:44And that while they're seeing good wage growth, it's rising really no more than real inflation. I say real because there are a lot of subsidies that are capping, we're under calculating the level of inflation. And now you have the intervention that we've seen. It was last week. I think it was last Thursday. And, you know, another morning, or maybe it was Tuesday, another morning going through earnings. And then from 10 seconds, I see the yen go from 164 to 159. And that was pretty notable. And we know that this intervention and probably the prior one a few months ago, that U.S. Treasuries were a source of funds.

5:29And Scott Besson said, OK, no more. We are going to intervene with you, plant our flag, too, in defending the yen. at the same time open up a Fed facility that will allow you to borrow money, even though you have to pay it back, which what funds are they going to use to pay it back with? And that tells me that U.S. treasuries are no longer just a buy and hold thing in the eyes of foreigners. It's not, okay, let's just park money there and hold the maturity. These are now potentially a source of funds. And that tells me that U.S. treasuries, at least in Japanese, are in a weak hands. And at the same time we're taping this, the Chinese yuan quietly is now at a three-year plus high against the dollar.

6:13We know that the Chinese have cut their treasury holdings in half. At the same time, they've dramatically ramped up their gold holdings. So as the yuan continues to rally and they lose money owning U.S. treasuries, the dollar's not hedged out, which maybe it is, but maybe it's not, The dollar becomes this alternative to develop market sovereign bonds where a lot of money has been parked by governments and central banks around the world. Yeah.

6:45Trevor Hall: So they use the – and correct me if I'm wrong here – the FIMA repo facility. So this would be basically the cash I was giving to them for the intervention that will supposedly have to be paid back. Well, that's probably another conversation for another day. But walk us through what this signals about the Treasury market fragility. Are we maybe discounting or not discounting enough of just the weak hands that are holding U.S. debt now? Yes. So this facility was created in 2020 after COVID shutdowns began and foreigners puked U.S. Treasuries to the point where the Fed came in as the main buyer of all this foreign selling.

7:39And they said, OK, we can't have this happen again and have foreigners use the U.S. Treasury market as a source of funds in a rainy day. And rather than them having to sell those treasuries, we'll create this facility where we'll lend them the money to do what they want with their treasuries as collateral. But again, they still have to pay the money back. They still need to find the money to pay it back. I just think that the hope was they can stem some of the panic. So that's what's most interesting. And, you know, maybe I'm grasping at straws for the rally in gold here. But to me, it was notable, like I said, in light of a day where the dollar treasuries really didn't do much.

8:31And maybe it's a follow through on hopes, again, that we would come to an agreement with Iran. And, you know, because we know that war on, gold sell off was one trade. and maybe wore off, buy back your gold, could be that trade. Maybe that's a factor here as well. Yeah. Is this a sustainable solution?

8:56Trevor Hall: It doesn't feel like it. No. The BOJ has to follow through with a rate hike in September. They have to follow through with a rate hike in December. They have to. And actually, there could be some benefits to that But if long rates actually fall in Japan in response to that, because if we can relieve some of the upward pressure and long rates because the BOJ is stepping up their battle against inflation, well, maybe that also eases some pressure on this upward trend in European yields and U.S. yields. Because we're all highly correlated here in terms of the long end of our yield curves. And I also think debts and deficits now matter.

9:42I think that's a factor. And, but I think there's a global aversion on the part of investors outside of like insurance companies and pension funds that have to buy long-term paper. The rest of the world doesn't feel like owning it anymore. And if you get the BOJ that gets more serious about tackling the weakness in their currency and inflation, well, maybe that is something noteworthy.

10:07Trevor Hall: I also don't want to grasp at straws, but it's hard not to do that, specifically when you have huge unprecedented news like we saw last week here, Peter. But I do find it interesting. The timing of the intervention was after the FOMC meeting at Presser. And it's not something they probably thought of doing just on a whim on a Thursday night. They probably had this all lined up, ready to go. So, I mean, do you find it strange at all that they did it right after the FOMC so nobody would have any questions about it if they did it prior to? I'm going to answer that with a yes and a no. Yes, yes that, to your point, it was done right after the Fed meeting.

10:49And no, because once I saw them do that, the day of the BOJ meeting, I thought, they're going to shock the market and hike rates. because why intervene and not follow through with a rate hike? Of course they didn't. In fact, CalShe, the rate hike odds for last week was one penny. One penny. And so the market wasn't anticipating a rate increase, but I thought what a great way to really get a yen rally than to do it when no one's expecting it, even though you just intervene, what perfect timing. Now, Governor Ueda, in his commentary at the press conference, was hawkish. I mean, I went through his comments.

11:40So he did set us up for a September hike, and rate hike odds are now around 50, 5-0 percent. They were about 25 percent before this past meeting. So he is seemingly setting us up, and I'd be shocked if they did not because then this intervention is going to be all for naught. I mean, even Scott Bessent, who's now obviously a currency trader again, realizes that intervention only goes so far and you need actual substantive policy change in order to make it more sustainable. You're right.

12:16Trevor Hall: We've all kind of known the Treasury and the Federal Reserve have been working more hand in hand for a number of years. Now the autonomy is not necessarily there. It's far more vague now than it ever was. But I have heard this discussion that eventually those two institutions will, it's moving towards some sort of merger. Is this kind of in that sandbox as well, Peter? Are we starting to see a unified treasury and Federal Reserve just to save the system that is the U.S. dollar? I mean, I think on certain, well, here, the Treasury is using a Fed facility. So that's one form of some cooperation.

13:05Where it goes from here, we'll only know when we see it in terms of what their response function would be to some externality. I think what we're learning is that there will be something there But we don't know to what extent and we'll have to see what it is in response to whether it's in response to Losing control of the long end of the yield curve because we know Scott Besson is doing everything he can to tame the rise in long rates Whether it's an issue with the dollar we'll have to see but you can be sure that Kevin Warsh and Scott Besson are having breakfast, I think once a month or maybe even once a week.

13:52And, you know, they're not just talking about their golf game. Right. You know, this feels like, in a way,

14:02Trevor Hall: the 10 times magnitude of what those PPP loans were during COVID. You know, where they were putting cash into people's hands to keep the economy going, to keep demand. But in this case, we're putting capital into a foreign central bank in hopes of we get paid back, but just to save face of the treasury system. I mean, maybe that's sad comparing apples to oranges, but that's the first thing that popped into my mind. Like, this is a PPP loan of incredible magnitude to literally save a currency system. Yeah, I mean, this facility clearly was not meant for this. But we know that, you know, there's creativity is when it comes to creating policy, it's probably the only time Washington gets creative.

15:00They try to find, you know, some facility, some statute, some whatever to give them license to do something. But we know that the Treasury did it with Argentina. but they didn't initially use this facility, but you know, the U S treasury has stepped up. I mean, and for better or for worse, I mean, in the nineties, didn't Robert Rubin bail up Mexico? So, you know, this stuff happens. And, but I, I think it's a sign that's pretty interesting. And to talk about the fragility of the U S treasury market, that the real main reason for this, And let's be honest, is because Scott Besson didn't want the Japanese to be selling treasuries to finance further intervention.

15:49But I say just get the BOJ to hike rates and we don't have to worry about any of this.

15:55Trevor Hall: All right. So this is just an absolutely fascinating story that you can get more into the weeds with. And I don't think we've seen the last of it, to be quite honest with you. We'll see follow through with a BOJ rate hike. But what happens after that, we'll see. I'll continue to ask you these questions, Peter, as that story continues to unfold. On another note, let's talk about big picture U.S. economy things. You did write and mention that the ISM Manufacturing Index has rebounded a bit. Good to see. But there's a little bit of questions out there about just how much more expansion we can see within this data.

16:31Trevor Hall: Because it really has been selective, really, on AI data centers, aerospace, defense, also driving that numbers. There's still some speculation that maybe this cycle, specifically in AI and data centers, could be running its course as people continue to question its profitability. What are your thoughts here on this rebound? Is it more vulnerable than people maybe are expecting? Well, the rebound is certainly happening in the U.S., but it's happening globally as well. And when it's happening globally, it tells me that, okay, it's not just us. There's something global going on. Now, we have to understand that this came after basically three years of manufacturing contraction.

17:16And you mentioned the good reasons why I think we're seeing improvement. But I also think that we're also seeing a lot of restocking of inventories. I went through, gone through a lot of conference calls, both this quarter and last quarter, and heard a lot about companies that were pre-ordering, trying to get ahead of price increases, trying to get ahead of any potential supply chain issues. And I think that that is also helping to lift manufacturing. So if that's the case, that that's a factor, well, you're going to start to need to see an improvement in end demand to have that be sustainable.

17:58So no question with anything feeding into the data center construction, you're doing well. And aerospace and defense certainly doing well also. So and it's good to see a rebound. Again, we're just going to watch to see the sustainability on the inventory side. And then, of course, you know, the data center spending is going to continue on. And but we watch for, you know, what eventually slows that down. It's not a question of if it will slow down. It's a question of when it does. Because at some point, you're going to have enough compute power where you're going to have too much and you're going to stop building.

18:39It will be commoditized for sure. It already is. The Chinese are already telling us that it's commoditized. And that should be the concern here is that we're spending trillions of dollars to create a product that we are no longer going to be a price maker on. We are now a price taker. And Trevor, you and I have invested in the commodity business for a long time. And that sounds eerily familiar. Yeah.

19:11Trevor Hall: I hear that on a daily basis, Peter. it's you I'm very grateful for the time you give us specifically during those quarterly earnings calls because I know how busy you are so I'm grateful for your time today but if you from what you've read and heard over Q2 recently is there any sort of differential themes or things that stand out that maybe are a shift from what you heard in Q1 I assume the energy and Iran situation maybe is a little bit more pertinent now, although reasons to be a little bit optimistic as we talked to today, but anything that really stands out to you that is maybe shifting from quarter to quarter?

19:54Well, on the cost side, I'm hearing the cost pressures are rampant. And the question for a lot of these companies is to what extent can they offset it? they're all trying through productivity improvements. They're trying to push price when they can, but some businesses can't, and they're getting a cut in their profit margin. And that gets to also my continued point that anybody who is analyzing the inflation picture and is only looking at consumer prices is not looking at a complete picture. You have to look at producer prices as well. PPI is running about 200 basis points above CPI. So don't tell me there's no inflation because we're, you know, CPI is three-ish or PC is at three and a half and possibly decelerating.

20:51When PPI is at five and a half. Now with sort of the tone of the economy, I think we're still in this 2 % economy with the obvious strength in data center, The obvious strength in upper income spending and travel and leisure, luxury. Health care is obviously a bright spot as well in terms of job market growth. Manufacturing has been the lift, as we said. But lower to middle income spending, still a challenge. Heard that from Kraft, heard that from McDonald's and others. And housing. Housing is still in a recession. Housing has been now in a multi-year recession. And, you know, that makes up 15 to 18 percent of the U.S.

21:37economy all in, according to the National Association of Home Builders. So that sort of general trend hasn't changed outside of the improvement of manufacturing, which we'll take for sure. Yeah, yeah.

21:49Trevor Hall: OK. All right, Peter, I appreciate your time, as always. Quick one here for our first segment. Just really, I wanted to tackle that yen intervention. It's just an absolutely fascinating story. And obviously, we're in the height of Q2 earnings. So if anybody wants a real great recap of everything Peter's been reading and listening in on, the book report, highly recommend. I'll put the substack link in the show notes. Good friend of the podcast. Peter, thanks so much for your time and have a great rest of your week. Thanks, Trevor. Appreciate having me on. In mining, the difference between a good project and a great investment often comes down to one thing, visibility.

22:32Terra Hutton is a Sweden-based mining investor platform built to make the invisible investable. Even the strongest project can be overlooked. Geology is inherently complex and data heavy. And when it's reduced to raw numbers like drill results and technical reports, investors can miss the story, and companies can miss out on investments. Tara Hutton brings mining projects into the digital spotlight, combining data, narrative, and context in one place, so investors can see not just what a project is, but why it matters. Whether you're evaluating early-stage exploration or more advanced development assets, Tara Hutton helps turn complexity into clarity and information into insight, the kind of transparency that builds loyalty over time.

23:26Visit tarahutton.io to learn more. All right.

23:31Trevor Hall: Happy to wrap up our week here on Mining Stock Daily with some big picture technical analysis with our friend from Cap Thesis, Mr. Frank Capillary. Frank, good to see you. It's been quite the summer. It sure has, Trevor. Thanks a lot for having me. Yeah. Summer's fun because, you know, for us in Colorado, once we hit August, we kind of feel like summer is almost over. It's winding down. You guys on the East Coast are like, this is the height. Like, this is the pinnacle of summer for you guys. Everybody's gone. The pinnacle of humidity, that's for sure. Absolutely. Absolutely. Well, let's jump into it because you have been writing and talking a lot about the breadth of the market.

24:19Trevor Hall: And we are recording this Wednesday afternoon, Frank. Not only have we seen a nice rebound in almost everything, I mean, everything's like on a heater right now. I mean, tech stocks have really started moving. Gold's up three and a half percent today. I mean, Let's talk about breadth. Things look pretty positive right now. It sure does. It's amazing what four days can do, right? Walked in here on, you know, after the Fed meeting last Wednesday, looked like everything was about to roll over. And it's really just complete reversal, one of the biggest four-day moves for the S &P 500 coming into today in like over the last few years.

25:01And so, again, that couldn't have really have happened unless we had technology support this time. And so that's one of the biggest things. And if you go back and look at what the market has done over the last few months, there's been a lot of back and forth movement. As we know, semiconductors have come off its highs. That's really, you know, been the bane of existence for the S &P 500. But almost every time technology led, technology sector led on the day, we had negative S &P breadth. And then when it lagged, being the worst sector, we had positive S &P breadth. So it's, I mean, that is like the definition of rotation.

25:40And really that needed to happen to have the S &P and all the major indices kind of hang near their highs. Not really getting a chance to break out until just yesterday, the last few days. But it was almost like a perfect storm. Like if you told me that semiconductors would be off 20 % basically from the highs and the S &P wouldn't budge. Now you're breaking out some new all-time highs. I said, well, you would need pristine breath to occur, which of course has happened. Yeah.

26:09Trevor Hall: So is the breath confirming this rally, or are we seeing any sort of signs that maybe participation is narrowing beneath the surface at all? Yeah, but that's the concern, right? Because we'll look at some charts in a second, but it's very rare to see semiconductors still not at its highs and S &P considerably above. So it tells you that, you know, if we can't get a bid back into the biggest, most influential names eventually, and some of those other areas that have performed so well, like financials, industrials, healthcare, start to lose that sponsorship, then you can see how things start to roll over once more.

26:49But not yet. Okay.

26:51Trevor Hall: Any sort of market behavior, anything specifically, before we get into some of the charts that we love when you share with us, any sort of market behavior that you're watching that would tell you if this trend is a genuine change for more upward momentum? Yeah. Well, I look at the daily price action very closely, tracking a number of statistics around there. And so I think it's very important, other than breadth, is to see good closes. And we have seen that. But, you know, going back again, since this really started, you know, at least, you know, the first two months at least, we saw the S &P close above its midpoint 70, 80 % of the time, right?

27:31That just shows how interested not only, you know, investors are, but again, coming from institutional side of Wall Street, you know, had a front row seat to, you know, different types of trading strategies, the biggest hedge fund use during different market transition periods. And so, you know, when you're bullish, of course, what are you going to use? Strategies that allow you to participate all day long to make sure you're continuing buying because you're not going to be patient waiting for the market to come to you if you expect the market to be higher. And so that is just one key thing I'm looking at.

28:07If you see that eventually change before the market comes in, I think it will tell us that the character is changing once more.

28:13Trevor Hall: What about a rotation? We kind of had glimpses of rotations from the major leading tech sector into, you know, more, you know, staples type things, even stuff in raw materials. We've had glimpses of that here this year. Is that rotation still intact or is this something that's kind of been faded? It's still there. And I would say, you know, it's beyond those sectors as well. I know that those are important ones, but in terms of having a footprint within the S &P 500, those are small, right? And so for the rotation to really be meaningful and helpful, as it has been, talking about basically two non-growth sectors that are the biggest, right?

28:54Financials is actually the second biggest sector within the S &P 500. And then industrials has the most components. So both of them breaking out to new highs, obviously key components of what the S &P has done and will do going forward. Okay.

29:10Trevor Hall: All right. We're going to obviously talk about gold and precious metals and the miners here through the charts, but let's kind of break in. I know the S &P has really been just incredible moves here in the last couple of days, Frank. So maybe let's pull up those charts and start there.

29:30Okay. All right. Can you see that, Trevor? Sure can. Sure can. Okay, great. All right. So we'll just go back to how we got here first. And, you know, as the market was rallying, starting looking at this daily chart, going back to March, saw the rollover to obviously pivot and a strong move higher. Now, along the way, of course, I'm always looking for bullish patterns to develop. And one of, you know, there was a few here we won't talk about. We just can't really see that well at the very beginning. But one that got a lot of attention was this tiny little pause here at the end of April, which ended up being a bullish flag pattern.

30:08So all that means is you have a strong move. It moves basically sideways for a few days, maybe sometimes a few weeks, and then breaks out to the upside. The way you measure that, take the flagpole, just as you would imagine, the height of it, and you attach it to the breakout zone. And so when that happens, it produces an upside target above previous highs, 7 ,680. And again, what you want to see here is immediate upside follow-through. Another part of this, Trevor, I'm sure you'll appreciate, is that it got a lot of pushback, especially from the folks on X about this one. It's because tiny, you know, that's not a flag.

30:46That's, what are you talking about? How can we consider another move higher after just a sudden 15, 20 % advance in just a few weeks? But, of course, what this does is when you get a clean breakout, it just increases our conviction that the target could get hit. But more importantly is that once you extend from an area like this, it just creates a cushion of which the S &P can back and fill. And, of course, you're going to have to assume there's going to be some kind of rate of change happening after just, you know, if this was 20 % up for the S &P 500 in two months. At some point, that pace was going to obviously alter.

31:25And so basically worked out as well as we could have anticipated because it's not really a race to get here. Remember, this was three weeks in the making before the breakout, and it took another three months to get there. This is probably the healthiest you could imagine, right? Yes, we're up about 6 % in four days. We're also up 6 % in three months, right? So that's why I think it's important for that to occur that way.

31:53Trevor Hall: Did that three months of just kind of nothingness just continue to fuel this move, if it was going to bust higher, that it had a lot of kindling to move really strong when it finally did? It did. And I think one of the main reasons for that, Trevor, is a great question, is that you can tell here these all could be also construed as potential topping patterns along the way. Right? Mm-hmm. And so when these breakdowns were averted, that just gave more reason for people to buy the dips. Now, the concern was that those dip buying opportunities weren't really being rewarded as strongly as they were and also not as immediately as they were back in April or May.

32:39So I was voicing, you know, just the thought of when our buyers start or start, when would they start to be impatient and stop buying? And so I think we were close to that. Because remember, this right here, right before all this, this last little ditch effort to the downside was the, you know, almost 2 % soft we had on the FOMC decision day last Wednesday.

33:02Trevor Hall: Right, right, right. And so from that point, again, just showing you two other patterns that developed because of it. And again, you have to, you need two-way volatility for bigger formations to take shape. just the way, you know, how you conduct a measure move. And because of that last downturn, this, to my perspective, is a bullish cup-on-handle pattern. So the breakout there, and again, we measure it very simply, take the heart of the pattern, attach it to the breakout, and get a 7 ,925. And just one more example, we're going to look at all this action from late May, early June, put it inside this trading box, very neatly.

33:46That entire move then projects an upside target just above 8 ,000. And so patterns, you know, targets are one thing, but again, it's a track we go on to get us there. More importantly, I want to see now the market consolidate this huge move, obviously stay within the confines of the breakout zone, which it just did, and allow more digestive, you know, phases to build. And of course, best case scenario is how those leveraged. And we'll see. You know, having these targets are fun to talk about, looks great on the chart, but we know that these are all tentative until we see some real follow-through.

34:23Trevor Hall: Yeah, no, absolutely. Let me talk to you about long-term targets here, Frank. We had David Hunter on Contrarian Investor a couple of weeks ago, and he, you know, he goes out there, and he puts a lot of big forecasts, specifically on major indices and precious metals. And this summer, he's been going out, and he's, I mean, big numbers on the forecast before we potentially get that, you know, there's nothing left to give when we go into a steady bear market. If you put, I mean, if what you're saying, does it kind of continue to support that thesis that we could have a much longer, huge move to maybe 10 ,000 S &P?

35:12I definitely could. I try not to play that game because I don't know how to play it.

35:16Trevor Hall: No, I understand. I understand. I understand. Yeah. You need that. Like, I want to have evidence that's here. How did you get here? This is how. It's projected higher. And I'm sure that he has plenty of reasons behind that gives those numbers. And sometimes, you know, people say something's undervalued and it can get to this point. But again, I'm trying to look at this, you know, not so much from a tactical standpoint, but I'm always looking at it from a perspective of, you know, what is going to change my mind with this? Because eventually these upside targets just may be voided at some point.

35:52Trevor Hall: But your current target is just north of 8 ,000 right now. Correct. Yes. Okay. All right. Yeah. Still a big number. Still a big number. Still a big number, yeah. And so this is the next chart here. Trevor, just a lot of different numbers on here, but this is just a very short-term view, kind of what I was talking about, how to get an idea from a tactical perspective how this kind of ebb and flow along the way. And so for your listeners, it's a two-hour chart. The bottom is a 14-period RSI. And so what happened with this last big move higher, this, the RSI, 70 is overbought. It got almost to 80.

36:33And that's a lot. Also considering that we had not seen an overbought level, even in a very short-term indicator like this, hence the late May. So what we like to write about a lot is we know that the market is moving or doing well and supported by momentum. if those intermittent rallies are strong enough just to push this, again, very short-term indicator to overbought territory, which it didn't do. Along the way, that's when we got those marginal, you know, breakout opportunities, which didn't work out either. So again, that's why this last pullback last week was a little concerning because we still hadn't gotten there.

37:09And remember what happened back from late October through the beginning of the year when the same type of scenario occurred, obviously the bottom fell out. It wasn't a huge decline, as you recall, but still was enough to get people concerned. So having this occur, number one, shows we're back on the right track. It also says that this now move is probably not sustainable. We're not going to have up almost 7 % in five days and think that's going to stick.

37:37Trevor Hall: Mm-hmm. Potential correction just due to the momentum running too hot. Exactly. And it's just a matter of the rubber band getting a little bit too stretched too fast. And so how that snaps back, we know it's going to at some point. It's just a matter of seeing buyers step in at higher prices. Whereas before, just over the last number of months, it was really buy weakness and sell strength. Okay. Let's head over to semiconductors. This has obviously been the leading driver in the IndyCar race of the market. That's correct. And so now, this is a bearish pattern. I have to say still. right obviously massive move up carried everything explosive historic whatever you want to call it but when it topped it really did top and so right now it's trying to fight back obviously and so we're viewing it like this this is obvious this looks like a you know classic bearish head and shoulders pattern for the breakdown targeting 460 and so at the lows again last week got just 500 so getting relatively close to that big snapback but again this looks like a mess to me still, right?

38:48This eventually could turn into a bullish pattern, but we're looking at this with these colors and we're just trying to visualize risk, right? So anything within this red, which is near the breakdown zone or above it or just slightly above it, still risk of it moving lower. And obviously as you move higher to where the right shoulder of this pattern is, that's when things could eventually get negated. And this is actually a trade idea we have for our clients. We'll have a look back. We put out at least one trade idea per day. This is the first short that we recommended out of all of them since mid-April.

39:27Now, there's a number of buys along with this one, you know, because they look different. They look like, you know, real breakouts. This was a classic bearish pattern. And I was, you know, toying with the idea of not doing it because it's such a, obviously, polarizing area now. But at the same time, it's a trade. I'm looking for a bearish pattern. I'm going to short it, no matter what it is. And so it's still in play for now. And again, it's an interesting time of just because the S &P is doing one thing and the semis are doing another. And so on the show, that right here, right? If I were to show you this chart, Trevor, and said, which one of these looks like the semis can out your ETF and which one looks at the S &P?

40:06The one that spiked to new all-time highs and the one that's kind of like struggling a bit. So it's something you don't really see that much, right, with SMH struggling, at least now. So this is one thing I think is an interesting dynamic because it's really – it's rallied, but from, you know, in terms of being close to its highs, clearly underperformed as of right now.

40:28Trevor Hall: Yeah. And that – it's interesting to see these two charts lined up in the middle of financial reporting. You know, we have all these Q2 numbers coming out, which really could drive markets, you know, every day and this week specifically. So maybe we'll see if those two continue to line up and converge together or if they even start parting ways a little bit more. We'll continue to see. Yes, exactly. And just wanted to give you just one more chart, which I just passed through for a second. This is just a long-term perspective. again just making sure we understand exactly where we're coming from here where from april to may of this year of course the biggest run sm or the socks etf or i'm sorry the socks index the reason why we're using this one is because it has a lot more history to compare things to anyway up about 70 percent in two months so if we go all the way back in history to the beginning, to when this was first created in 1995, the only other time when we had a two-month move of at least 65%, not surprising, January or February 2000.

41:43So regardless of what happens after this, it's just not sustainable. So best case scenario, just consolidates for a bit, works off as overbought in nature. But if you're looking back at this and say, well, what happens the last time something rallied this strongly for two, three months? There's your answer.

42:01Trevor Hall: Yeah. Do you, are we starting, well, potential, could this industry really lead? Well, I mean, I think I already know the answer because it's led everything to the upside. The potential of it to leading to the downside, pulling everything down with it. Is that kind of how this market is, the mechanics of it is currently set up to do? Yeah, that is a concern. That has been a concern. And again, it's only because of almost historically strong breath that that hasn't happened. And so we'll see, you know, if that can continue. We're, you know, getting through earnings season for the most part. Good responses to those companies.

42:42Obviously, many stocks are making new highs with the S &P 500. But we just have to wonder when those get too hot. When we see some selling in those other areas. does it flow back to the now underperforming semiconductors or are they completely different animals at this point? And then you have this situation where, of course, everything rolls over and the higher beta names like this obviously get hit the hardest, but then pull everything else with it. Okay.

43:11Trevor Hall: I do want to talk about gold here, Frank, but before we get there, what else do you need to walk through with us before we get to our beloved precious metals? well one thing again we just talked about it this is this is just a chart of the cumulative s &p advanced decline line right how again when the s &p was struggling and trying to hold near ties that's when the s &p or the cumulative best decline line broke out so remember late may i'm sorry late june is when it happened so again still trying to break out didn't do so but the massive decline line moving higher. And I think you can see this even better looking at the RSP equal weight S &P 500 ETF, right?

43:58So it's obviously weights everything the same way. And so it's not pulled lower. Technology does it worse and obviously not pulled higher as much when it does better. But same thing, when the S &P itself was struggling, this continued higher, showing exactly what was going on. So many stocks within the index continued higher, So it was supportive by the breadth. So the advanced decline line looks very similar to what the average stock has done over the last number of months. So I think this is an important one to look at.

44:30Trevor Hall: Okay. Let's talk about gold. Frank, you and I sent some emails back and forth in preparation for this conversation. As I think we thought the move in the last couple of months in gold, the digestion was a healthy sign. The chart looked pretty good. We weren't dipping. We dabbled a little bit below$4 ,000 an ounce, but we didn't see more selling. In fact, it was a huge dip buying opportunity for the gold buyers. And today, how fortuitous that you and I just, we just plan to discuss when gold's up three and a half percent. We plan this really well. But let's talk about this. I mean, what I don't want you to do, Frank, is tell me to be cautious when gold's up three and a half percent.

45:16Trevor Hall: So let me enjoy this. But talk about this move and is it constructive for us? Yes. Great point. And I think we should start with this long-term view first, I think, just to bring things back to, you know, perspective where we came from. And so we may have talked about this in one of our last meetings, Trevor, but, you know, don't forget, like this was up a nine-week rate of change of 20%. Doesn't sound like much now because we just talked about the SOX index. However, that's big, right? Going back, you know, 50 years, we can count on our hands how many times that has happened. And so needless to say, sometimes it occurred during the middle of long-term uptrends.

46:02but what's pretty clear is probably wasn't the best time to dip your toe in, right? Because there's going to be some sort of pullback to at least, again, normalize some of these very stretched indicators. And so that's what happened. You can tell the first time that occurred actually was before 2026 and it continued higher. But again, buying that, you know, toward the tail end of a very strong move obviously led to some frustration just over the last few months. And so because of that, Again, we know what this looks like. If we zoom in, right, obviously this was the parabolic move higher, the crash, and then since then what's occurred.

46:39So a few things. We see this big move, like you just mentioned, gold at this time. I captured this at 4%. Breaking through what looks like a triangle pattern or some sort of bullish pattern, which is very important because we haven't had a chance of seeing that at all ever since things rolled over. and also now poking above pretty aggressively, I must say, the 50-day moving average, which of course was a difficult chore to do at any time over the last few months. This is exactly what this means, right? We know if you go all the way back to last summer, the same thing, but pullbacks all were able to respect that rising 50-day moving average until we got to March when it rolled over.

47:24And there's various times when it tried to rally back above it and failed. And we can see how it also resulted in the RSI finally getting above this midpoint, right? All along the way, we talked about this in terms of, you know, the S &P as well, but seeing momentum obviously confirmed the move is what you want to see. So along the way, I mean, it's been asked so many times. I'm sure you have as well, Trevor, is that, you know, when is it going to be time? But without any sort of effort for this, getting through that 50-day, without any sign of momentum pushing above 50, there was no reason to get even slightly excited about it until now.

48:05So I do think this is a time when we should think about, well, is this move for real? And again, this is the only time we can really actually ask that question so far really going back to March. Yeah.

48:19Trevor Hall: I would maybe not be surprised to see a pullback to retest that 50-day moving average. If that happens and we see a close that maybe tests that line and maybe closes above it, is that a potential buying opportunity? I think so. And again, one of the things that I've been talking to clients about is people that want to buy the dip. It's always, you know, that old Wall Street adage is you don't want to look for the lowest price because the lowest price could always get lower. You want to look for the best one. So like you said, you want to see some evidence. You want to see a price lift. You want to see some sort of momentum turning if that means you're up 10 % or 15%, but with 40%, 50 % potential upside to get back to where we were or more than that.

49:10I think it's worth having some patience there. Okay.

49:13Trevor Hall: How about the miners, Frank? Obviously, they will follow the gold price, and we've seen a big move in the miners as well with this. In fact, it's probably safe to say the last couple of days probably kind of preempted the move higher for the gold price, which is always a healthy sign. If you're dabbling in mining, gold mining stocks, you want to see the miners kind of start that move prior to the gold price. So this was nice to see. It was, and you nailed it too. and I'll go back to, before talking about the chart itself, I'm talking to clients just the last few weeks. And I said, you know, again, not saying that didn't detect any bullish patterns, but you always wanted to look for any change of character.

49:58And from that perspective, we saw GDX making lower lows, but we saw slight higher lows with the RSI. So again, showing that maybe even though we're continuing to see prices decline, doing so at a decelerated rate or just wasn't as strong. As we can tell, these lower lows were just marginal. Finally seeing some sort of buying that got some sponsorship along the way. And so very similar to gold, not surprisingly, pushing through the 50-day moving average and also now noticeably above the steep and very long downtrend line, connecting things from the March high to here. So again, very good first step.

50:45Again, you're getting close to the point where maybe you pull back a little bit, but it's created an interesting scenario now where it could pull back, have another higher low, and then we could look then toward the last number of months then developing into a base, right? Again, that's how this could be progressing. We've seen it before, right? We went back to obviously not as severe, but last October to December, right? If you waited for this to come back up to the prior high and then bought, you were rewarded pretty well. So that'll be what I'll be looking for next.

51:18Trevor Hall: Well, you know what's missing on these charts here, Frank, that you put on the S &P is some forecasts. Do you have forecasts for the metals here? Well, I will once I see some bullish patterns form, I can make projections from that. Okay. Well, we'll tackle that when you do have something to share. How about silver? I mean, people are just kind of waiting to see triple-digit silver once again. How constructive has the silver chart been? Well, I was talking to our friends, Tony Greer and Jared Dillian, on their podcast market, but they're awesome. And I think Tony put it as, all right, let's turn to the ugliest chart out there right now, silver.

52:03And it's pretty ugly. But let's look at the first, the long, very long-term quarterly chart, right? So we talked about this one before, probably every time we've spoken over the last year, where this big multi-decade couple handle pattern is still in play. But, you know, it just got really extended. So what's happened after that, just pulling back, but best case scenario, having that pullback occur above 50. And so far it has been. And so very similar right now to what the GLD and GDX has been doing, but more so is not even to the 50-day yet, at least last I checked with this chart. But the same premise holds.

52:46It's been trying to stabilize just over the last few weeks. We can maybe call this a potential bullish formation in play, right? Inverse head and shoulders pattern maybe. Having to break out, get it back above that 50, then hold and then build upon that. that's when really this could get going. And again, we can look to, you know, maybe have this rally even to 70, maybe have some more back-end filling and then have this entire base, which could be then three or four months old. That's when we really could see, I think, momentum come back. And again, we've seen it before here. You know, back last May to June, it took a while.

53:21But once that finally worked out, then just obviously we know what happened after that. So it's taken a while, but, you know, We've seen the different failures near that 50-day. We've seen the RSI, again, struggle to maintain any sort of buoyancy around 50. Just need to see that change, not for a day, not for a week, but persistently. Then you'll start to see some generalist momentum traders come back in. Of course, that's what supported the move up into the early 2026.

53:51Trevor Hall: Awaiting for some sort of confirmation, it seems like, with silver yet. Yeah, I think so. But again, this last few days obviously looks a little bit different in a good way for all of these so far. Okay. Frank, we just got done speaking with Peter Bookvar on the intervention, the U.S. Treasury, with the Japanese yen. That's not necessarily a story I want to tackle with you, but it did have implications on the U.S. dollar. And we've seen that chart. And so this has obviously been a driving case for precious metals. It goes hand in hand. What are you seeing on the Dixie here that really has implications, obviously not for just metals, but the entire market itself?

54:40Right. So a lot of people talk about the 100 level on the U.S. dollar being important psychologically, which, of course, it is. But I think it's important to show just how significant it is on the chart. And so looking at the dollar going back at least to the middle or the summer of last year, and if we can classify this as one just huge trading range, I think everyone sees it. And top of that range, again, coincidence or not, is a rate of 100. And, you know, if you're looking at this from an equity market point of view, what is the best thing possible? You want to have a dollar that does nothing, and you want to have race that do nothing overall.

55:19all. And that, of course, is what's really been the case for the better part of the last three years, which is why I've seen that bid consistent across equities, again, for a few years. So now, as you know, when the dollar rallied a bit in June, you know, in July, S &P, that's when it started to lose its footing just a bit. We know it stayed relatively close to the tie, but it's not a coincidence that occurred. And so now with it back under 100 for the time being, it's very important that it holds underneath that, right? Because you haven't really seen a big rally in the dollar probably since 2022.

56:00And we all remember what happened during that time frame. And we can go even further back and look at it from this angle. We can see that, you know, it's riding this uptrend as well. This uptrend line goes all the way back to 2011. So there is obviously a consistent bid in here. And seeing that hold clearly could put those levels that we did see back in 2022 back in play, where if we go all the way back again, this is a 50-year chart when those long-term uptrend lines were broken. Two prior times, dollar collapsed for years afterwards. So I think never apples to apples, but seeing this hold so far on this uptrend, probably not a coincidence, obviously important to continue to do so.

56:44Trevor Hall: You know, what's interesting about those lines is the steepness got shallower and shallower as both of them progressed. And by the time the sell-off settled, it was lower than where it originally started, where that last trend upward started, right? So you can almost make the argument that if we do see a breakdown through that line, we'll potentially see a new lower lower on the Dixie. Amazing, right? It would take a while to get there, but yes, that is a very obvious trend that you pointed out. I mean, below 75. Imagine that.

57:30Trevor Hall: That's kind of scary. I mean, what does the world look like? I mean, what does our economy look like with the Dixie at below 75, Frank? Yeah, I don't know. That may be two presidential terms away if we see the pullback last that long. And this brings up a very interesting time right now because I think we're all thinking about yields on dollar moving together. Is there a time when they diverge as well? What does that look like? Is it because of the Fed operating differently? Is it because the market force is taking over? Time will tell and ask an important one. Yeah, absolutely. All right, Frank, you always share a tremendous, some great technical analysis with us.

58:14Trevor Hall: Out of all these charts that you did share, maybe there's one you haven't, what is maybe one that you have to keep a steady eye on every day? Which one is most important to you? Well, I take every day and look at the S &P 500 from various angles, but over the last three weeks, I think I've cited a semiconductor stock or ETF every day. right they're that important clearly even though the market has been able to rally in spite of them or at least stay near the highs it's not going to continue forever so at some point in the rubber band that's stretched is going to have to snap back in some regard whether that as we talked about if the smh continues to roll over and you know and re-triggers that bearish pattern it may not be as easy for the rest of the market to hold in there that time so that's an important one probably at least until the end of summer when NVIDIA reports their earnings in a few weeks.

59:07Trevor Hall: Okay. All right. Frank, thanks so much. Good to see you once again. What are you doing for the rest of the summer? Are you going to take some time? Hit the beach? Well, I came back from Italy a few weeks ago, so that was the big trip so far. So, maybe we just talked about maybe going to Chicago in a week as well, so that'll be fun. Okay. Well, I'll leave some beef sandwiches out there for you. I can't get enough of those. All right. All right. And Cap Thesis, wonderful subscription service. I will try to put a link in the show notes to that. I highly recommend looking it up. It's a great breakdown of every chart that Frank is looking at every single day.

59:49Trevor Hall: Wonderful service. Can't recommend it enough. Frank, thanks so much. Have yourself a good rest of your week. Thanks, Trevor. You too. The information presented should not be considered investment advice. Mining Stock Daily and its affiliates are not responsible for any loss arising from any investment decision in connection with the material presented herein. Please do your own research or speak with a licensed financial representative before making any investment decisions.